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Free Trade and Comparative Advantage

Polyhistor
Posts: 2
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3/6/2013 8:14:51 PM
Posted: 3 years ago
I have recently changed my position on free trade in favor of minor restrictions like tariffs to protect domestic industries. One common objection I have heard to this is comparative advantage; however, I recently read something that was intriguing.

I'm paraphrasing, but te article essentially said that because of our globalized economy, companies tend to outsource where labor is cheaper and not to a country that may specialize. Examples are China, Mexico, etc.

Is this a wrong assumption?
darkkermit
Posts: 11,204
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3/6/2013 9:05:42 PM
Posted: 3 years ago
That's comparative advantage bro. If the labor is cheaper there that means that goods/services can be produced at lower prices. Labor is cheap in other countries because they do not have the human capital and capital that we have.
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wrichcirw
Posts: 11,196
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3/6/2013 11:58:51 PM
Posted: 3 years ago
At 3/6/2013 8:14:51 PM, Polyhistor wrote:
I have recently changed my position on free trade in favor of minor restrictions like tariffs to protect domestic industries. One common objection I have heard to this is comparative advantage; however, I recently read something that was intriguing.

I'm paraphrasing, but te article essentially said that because of our globalized economy, companies tend to outsource where labor is cheaper and not to a country that may specialize. Examples are China, Mexico, etc.

Is this a wrong assumption?

My understanding is that the entire point of specializing is to achieve comparative advantage.
At 8/9/2013 9:41:24 AM, wrichcirw wrote:
If you are civil with me, I will be civil to you. If you decide to bring unreasonable animosity to bear in a reasonable discussion, then what would you expect other than to get flustered?
BigRat
Posts: 465
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3/8/2013 5:00:32 AM
Posted: 3 years ago
At 3/6/2013 9:05:42 PM, darkkermit wrote:
That's comparative advantage bro. If the labor is cheaper there that means that goods/services can be produced at lower prices. Labor is cheap in other countries because they do not have the human capital and capital that we have.

Ya. This is what I was thinking. Comparitive advantage also applies to labor.
malcolmxy
Posts: 2,855
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3/8/2013 7:57:55 AM
Posted: 3 years ago
At 3/8/2013 5:00:32 AM, BigRat wrote:
At 3/6/2013 9:05:42 PM, darkkermit wrote:
That's comparative advantage bro. If the labor is cheaper there that means that goods/services can be produced at lower prices. Labor is cheap in other countries because they do not have the human capital and capital that we have.

Ya. This is what I was thinking. Comparitive advantage also applies to labor.

That's an absolute advantage, not a comparative advantage. Labor in China can produce any, and all, goods cheaper than their American labor counterparts, monetarily.

Comparative advantage looks at the opportunity costs involved.

For instance, if you and I were competing in both stupid forum comments, and typos, your advantage in the amount of stupid forum comments that you post is like 100 to 1 as compared to mine. BUT, you only make more typos at a rate of 10 to 1.

Therefore, if we were to divide labor, even though you have an absolute advantage when it comes to both making stupid forum comments and making typos while doing so, because you are less skilled at making typos when compared to making stupid forum comments, you should concentrate on making stupid comments, while I should begin to specialize in typos.

I thought you said you were an economics major.

You must have been sick that day or something.

Me - 61

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malcolmxy
Posts: 2,855
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3/8/2013 8:01:57 AM
Posted: 3 years ago
At 3/6/2013 8:14:51 PM, Polyhistor wrote:
I have recently changed my position on free trade in favor of minor restrictions like tariffs to protect domestic industries. One common objection I have heard to this is comparative advantage; however, I recently read something that was intriguing.

I'm paraphrasing, but te article essentially said that because of our globalized economy, companies tend to outsource where labor is cheaper and not to a country that may specialize. Examples are China, Mexico, etc.

Is this a wrong assumption?

Kind of. It depends on how much of a comparative advantage another country might have over them in X good or Y service.

The cheaper labor costs could outweigh the comparative advantage (or, they might not...I don't want to do the math, so you're on your own), especially since their labor is not being utilized over full capacity yet. The situation you're referring to would come when they hit peak labor utilization. At that point, one would hope that they would actually begin to specialize on that in which they had a comparative advantage, but if they didn't, then what you heard would be correct.
War is over, if you want it.

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BigRat
Posts: 465
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3/10/2013 8:01:20 AM
Posted: 3 years ago
At 3/8/2013 7:57:55 AM, malcolmxy wrote:
At 3/8/2013 5:00:32 AM, BigRat wrote:
At 3/6/2013 9:05:42 PM, darkkermit wrote:
That's comparative advantage bro. If the labor is cheaper there that means that goods/services can be produced at lower prices. Labor is cheap in other countries because they do not have the human capital and capital that we have.

Ya. This is what I was thinking. Comparitive advantage also applies to labor.

That's an absolute advantage, not a comparative advantage. Labor in China can produce any, and all, goods cheaper than their American labor counterparts, monetarily.

Comparative advantage looks at the opportunity costs involved.

For instance, if you and I were competing in both stupid forum comments, and typos, your advantage in the amount of stupid forum comments that you post is like 100 to 1 as compared to mine. BUT, you only make more typos at a rate of 10 to 1.

Therefore, if we were to divide labor, even though you have an absolute advantage when it comes to both making stupid forum comments and making typos while doing so, because you are less skilled at making typos when compared to making stupid forum comments, you should concentrate on making stupid comments, while I should begin to specialize in typos.

I thought you said you were an economics major.

You must have been sick that day or something.

Me - 61

You - 0


Okay. Let us evaluate this comment.

Literally all I was saying was that comparative advantage and free trade have effects on labor and that this is a good thing. That is it. That is all.

Nowhere here do I say anything incorrect about comparitive or absolute advantage. This was an extremely generaly comment I made. I understand the difference between comparative and absolute advantage, and nothing I said here suggests anything different.

So, you just spent about 4 paragraphs and hundreds of insults (and that meaningless score thing you think is so cute) making fun of something that I never said... a mistake that I never made.

This was a little comment I made without really thinking twice. The fact that you spent so much energy "correcting" me when I didn't say anything incorrect is an example of how intellectually bankrupt you and your ideas really are.
malcolmxy
Posts: 2,855
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3/10/2013 11:25:57 AM
Posted: 3 years ago
At 3/10/2013 8:01:20 AM, BigRat wrote:
At 3/8/2013 7:57:55 AM, malcolmxy wrote:
At 3/8/2013 5:00:32 AM, BigRat wrote:
At 3/6/2013 9:05:42 PM, darkkermit wrote:
That's comparative advantage bro. If the labor is cheaper there that means that goods/services can be produced at lower prices. Labor is cheap in other countries because they do not have the human capital and capital that we have.

Ya. This is what I was thinking. Comparitive advantage also applies to labor.

That's NOT what comparative advantage is, and as DK explained it, it DOES NOT apply to labor.

You were "thinking", as an econ major, that absolute advantage was comparative advantage, and I was thinking you were a retard.

Once again, I'm right.

Me - 62

You - 0
War is over, if you want it.

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BigRat
Posts: 465
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3/10/2013 1:37:44 PM
Posted: 3 years ago
At 3/10/2013 11:25:57 AM, malcolmxy wrote:
At 3/10/2013 8:01:20 AM, BigRat wrote:
At 3/8/2013 7:57:55 AM, malcolmxy wrote:
At 3/8/2013 5:00:32 AM, BigRat wrote:
At 3/6/2013 9:05:42 PM, darkkermit wrote:
That's comparative advantage bro. If the labor is cheaper there that means that goods/services can be produced at lower prices. Labor is cheap in other countries because they do not have the human capital and capital that we have.

Ya. This is what I was thinking. Comparitive advantage also applies to labor.

That's NOT what comparative advantage is, and as DK explained it, it DOES NOT apply to labor.

You were "thinking", as an econ major, that absolute advantage was comparative advantage, and I was thinking you were a retard.

Once again, I'm right.

Me - 62

You - 0


I don't know why I keep on responding to your idiocy. I said I would stop and I am going to.

I would like it if you stopped posting this stupidity on my threads, but I doubt that you will. You love getting my attention. Makes sense. I am far more knowledgable than you are. If I were in your position, I would be trying to get my attention too.
malcolmxy
Posts: 2,855
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3/10/2013 1:49:49 PM
Posted: 3 years ago
At 3/10/2013 1:37:44 PM, BigRat wrote:
At 3/10/2013 11:25:57 AM, malcolmxy wrote:
At 3/10/2013 8:01:20 AM, BigRat wrote:
At 3/8/2013 7:57:55 AM, malcolmxy wrote:
At 3/8/2013 5:00:32 AM, BigRat wrote:
At 3/6/2013 9:05:42 PM, darkkermit wrote:
That's comparative advantage bro. If the labor is cheaper there that means that goods/services can be produced at lower prices. Labor is cheap in other countries because they do not have the human capital and capital that we have.

Ya. This is what I was thinking. Comparitive advantage also applies to labor.

That's NOT what comparative advantage is, and as DK explained it, it DOES NOT apply to labor.

You were "thinking", as an econ major, that absolute advantage was comparative advantage, and I was thinking you were a retard.

Once again, I'm right.

Me - 62

You - 0



I don't know why I keep on responding to your idiocy. I said I would stop and I am going to.

Because you have this pathetic compulsion to be thought of as correct, no matter how incorrect you are? Just a guess...I have nothing to back this up except the repeated instances of this behavior you continue to display, as well as the cowardice you continue to exhibit in ducking my debate requests.

I would like it if you stopped posting this stupidity on my threads, but I doubt that you will. You love getting my attention. Makes sense. I am far more knowledgable than you are. If I were in your position, I would be trying to get my attention too.

I would like it if you stopped being stupid, followed up by these nonsense justifications for why you were wrong and trying to turn it into something other than the truth - you have no f*cking clue about which you are talking.

Sometimes we have to accept that which we are unable to change, however.
War is over, if you want it.

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